Business 9609/33 May/June 2023: question paper and mark scheme

Mark scheme

1 Analyse how two barriers to communication resulting from LT’s online operations may impact the business. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis Developed analysis that identifies connections between causes, impacts and/or consequences of two points. Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks Knowledge of two Application of two Limited analysis relevant points is relevant points to a Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. Application of one two points. Knowledge of one relevant point to a Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: Only reward barriers. If more than two barriers are referred to, reward the best two. 1 Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of the concept of barriers to communication or knowledge of possible impacts of barriers. Developed knowledge + will be demonstrated through knowledge of the concept of barriers to communication and knowledge of the possible impacts. Knowledge of barriers to communication Definition of barriers to communication – factors which may prevent a message being clearly transmitted between the sender and receiver(s). Generic barriers such as noise, language, distance, technology failure. Knowledge of impacts of barriers to communication Generic impacts such as information not getting through or misunderstandings. AO2 Application Limited application, applies knowledge to LT once. Developed application, + applies knowledge to LT twice. Max one for application for the first barrier to communication and max one for application for the second barrier to communication. LT based in Asia but offers tours by local guides in many countries, there are likely to be some language and cultural barriers. The on-line business model relies on internet infrastructure for communication between customers, LT and guides. Time differences may also be an issue, for example if there are last minute changes to tour details. The LT booking system also relies on honest information being put up on the website about guides and tours. It may be a serious problem if information about customer tour requirements gets ‘lost’ in the system. 1 AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis OR offers a two-sided analysis. Development of application points, in terms of the likely impacts on LT when communication is not effective and impact on future sales and revenue. Barriers such as language and culture may result in misunderstanding of customers’ needs and wants leading to dissatisfaction, bad reviews on social media and ‘trip advisor’ type sites. leading to lower future sales. Any incorrect or misrepresented information also may mean that tours do not meet customers’ expectations leading to bad reviews and damage to reputation. Failure of internet infrastructure has the potential to mean that tours cannot be booked, may also cause lack of consumer confidence, as well as loss of revenue. Accept all valid responses.

Mark scheme

2 Analyse two ways LT can measure whether tours meet customers’ expectations. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis Developed analysis that identifies connections between causes, impacts and/or consequences of two points. Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks Knowledge of two Application of two Limited analysis relevant points is relevant points to a Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. Application of one two points. Knowledge of one relevant point to a Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: If more than two methods are referred to, reward the best two. 2 Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of the concept of meeting customers’ expectations or knowledge of possible ways to measure this. Developed knowledge + will be demonstrated through knowledge of the concept of meeting customers’ expectations and knowledge of the possible ways to measure this. Knowledge of meeting customer expectations Meaning of customer expectations, such as customers receive the service that they anticipate. Meaning of quality and link with customer expectations, such as quality being defined as meeting customer needs. Knowledge of how this may be measured Generic ways to measure quality such as customer feedback questionnaires or reviews on trip advisor or similar. AO2 Application Limited application, applies knowledge to LT once. Developed application, + applies knowledge to LT twice. Max one for application in the first way to measure whether expectations are being met and max one for application in the second way to measure this. The guides are taking customers on sightseeing tours, probably a few hours or full days, but possibly longer. The guides have the responsibility of making all the relevant bookings of transport and other arrangements. It would be fair to say that the quality of the tours depends on them. Some of the guides will have very specialist knowledge about places and may take customers to places they would not usually go with standard tours. LT customers may use the company in a number of worldwide locations, especially business travellers. LT have had favourable reviews on travel websites. Customers will be asked by LT to review their experience online after taking a tour. In the case of the group tours from the cruise ships this could be done at the end of the tour. 2 AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis OR offers a two-sided analysis. Development of application points Online feedback after the tour is taken will be more accurate than if the guides ask for written feedback before they leave the customer, because travellers will not feel under pressure. These comments may then be converted into a number of ‘stars’ or similar, which can then be used to measure customer satisfaction and quality and make improvements for higher future sales. Repeat customers will be easy to identify, providing accurate records are kept, indicating that the tours are meeting their individual requirements. Repeat customers will usually mean a high level of satisfaction and increased revenue. ‘Negative’ measures such as tracking any customer complaints may also be useful, as customers are more likely to let LT know if they are not satisfied. These can then be used to improve quality and increased future sales. An increase in the sales/number of bookings of a particular tour, such as market tours, indicates that customers have been satisfied and have told others. Accept all valid responses.

Mark scheme

3(a) Refer to Table 1.1. Calculate the payback period for LT’s proposed new Tour Hub. 1 Indicative content Responses may include: Payback at the end of Year 3 (36 months) (1) (120 000) + 30 000 + 40 000 + 50 000 3(b) Refer to Table 1.1. Calculate the accounting rate of return (ARR). 3 Indicative content Responses may include: ARR = average profit / average investment × 100 (1 mark if no correct calculation) Total net cash flow – original investment = $170 000 – $120 000 = $50,000. (1) Average investment = $120,000 / 2 = $60,000 $50,000/4 = $12,500. (1) $12,500/$60,000 X 100 = 20.83% (3) 21% (3) Common errors Use of ‘old’ ARR formula $12,500 / 120,000 x 100 = 10.42% (2) Forgot to take off original investment $42,500/$60,000 X 100 = 70.83% (2) $42,500 / $120,000 x 100 = 35.41% (1) %(units) not needed for full marks OFR 3(c) Evaluate whether LT should invest in the new Tour Hub. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion is made in the business context. Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 3(c) Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of a factor in investment decision or knowledge of new tour hub impacts. Developed knowledge + + will be demonstrated through knowledge of a factor in the investment decision and knowledge of new Tour Hub impacts. Knowledge of IA methods, such as payback, ARR, but also net present value (NPV) The new Tour Hub may provide access to a new market, so relevant ‘generic’ knowledge, such as market development Opportunity cost of investment decisions AO2 Application Limited application, applies knowledge to LT once. Developed application, + applies knowledge to LT twice. The new Tour Hub will enable customers to access advice and book tours in person, whether coming from cruise ships or staying in the city. The face-to-face contact may be welcomed by older, maybe high-income travellers who would not book on-line. The new small group tours will be booked through the hub. There will be a need for training for the full-time tour specialists who will be employed to work at the Tour Hub. It may be necessary to keep the Tour Hub open for long hours to accommodate customer needs. Reasonable payback and ARR. (OFR here) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis OR offers a two-sided analysis. Development of application points, in terms of the likely advantages and disadvantage to LT of the new hub, including impact on costs, future sales and revenue 3(c) Access to a new target market of customers who want to get advice and book ‘in person’ , including on the small group tours, should lead to more sales and ultimately more profit. There could be potential to develop this facility in other destinations if it is successful, so treat it as a ‘pilot’ for possible growth strategies in the future and increased market share. Marketing advantages, such as LT being visible in the local port should lead to a better reputation and higher sales . However The staffing costs may increase due to possible long opening hours, due to ships arriving at different times. Two full-time consultants may not be enough, so cost predictions may not be accurate. The current business model relies on electronic communication. Will the system need to be adjusted? Will there be more need for paper resources, such as brochures, at extra cost leading to less profit? AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. Either conclusion rewardable as long as it is justified. Success of Tour Hub will very much depend on the success of small group tours for cruise passengers. Many of these ‘new’ customers might have booked online, so won’t be additional business. What other information may be useful? Limitations of payback and ARR in this context. In the short term, this could lead to more customers, but in the long term will everyone book tour arrangements on- line? How secure is the relationship with the cruise company? Might this divert Kanon and Tonia from their other management tasks? How secure might international tourism prove to be over the next few years? Do Kanon and Tonia want to change their business model away from the original, completely selling on-line objectives? Accept all valid responses.

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4(a) Refer to Table 1.2. Calculate the price elasticity of demand for shopping tours. 4 Table 1.2 Analysis of recent monthly price and sales data Tour Original New Sales before Sales after Price elasticity of price price price increase price increase demand Shopping tour $60 $75 250 240 See Question 4(a) Evening street food tour $40 $45 300 200 –2.67 Indicative content Responses may include: PED = % change in quantity demanded / % change in price (1 mark if no relevant calculations) Shopping tour % change in quantity demanded = -10/250 × 100 = -4% (1) % change in price = $15/$60 × 100 = 25% (1) PED = – 4% / 25% = – 0.16 (4) 0.16 (3) Negative sign needed for full marks OFR 4(b) Evaluate whether price elasticity of demand calculations are sufficient for LT to make pricing decisions. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion is made in the business context. Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections Developed evaluative comments used to answer the context. between causes, which balance some key arguments. question. impacts and/or consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 4(b) Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of PED or knowledge of use in pricing decisions. Developed knowledge + + will be demonstrated through knowledge of PED and knowledge of use in pricing decisions. Knowledge and meaning of PED: responsiveness of demand to a change in price Generic knowledge of values and meaning of price elastic/price inelastic demand Knowledge of pricing methods such as cost plus and competitive pricing (penetration and skimming not so relevant here as these are existing products) AO2 Application Limited application, applies knowledge to LT once. Developed application, + applies knowledge to LT twice. Demand for shopping and markets tours is inelastic, whereas demand for street food tour is elastic. Shopping and markets tours are often taken by cruise passengers, who may be less sensitive to price changes than the backpackers who take the street food tours. Pricing should take into account the nature of the target market and also the alternatives on offer to them, for example the shore excursions offered to cruise passengers. Pricing of tour will also need to reflect changing prices of arrangements such as transport and entry tickets. Seasonal fluctuation may mean that it is necessary to offer ‘special deals’ at quiet (non-peak) times of year. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis OR offers a two-sided analysis. 4(b) Development of application points, in terms of the likely impact of price elastic and inelastic demand on sales and revenue for LT. Price inelastic demand for shopping tours suggests that passengers are relatively insensitive to price increases, therefore raising price should increase revenue. For example, the price rise illustrated would increase revenue from $15 000 to $18 000. Price elastic demand for street food tours suggests that passengers are relatively sensitive to price increases, therefore raising price should decrease revenue. For example, the price rise illustrated would decrease revenue from $12 000 to $9000. In the case of the new small group tours, demand may well be relatively inelastic, due to customer perception of more specialised tours with smaller groups, could support higher pricing decisions leading to increased profit. AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. It will be important for LT to keep information on the types of customers who take each of the tours, so that they can make pricing decisions with this in mind. The PED will change over a range of prices. For example, if LT increase the prices of shopping tours by a very large percentage then they will no longer be seen as ‘value for money’. Currency fluctuations may affect tour prices, if the currency of Country P appreciates or depreciates. Other external factors that affect tourism will also have some impact on LT’s ability to charge higher prices. LT objectives – to what extent might LT be willing to accept lower profit margins on tours such as the street food tour to widen customer appeal? How dependent are LT on the cruise company? Prices need to be competitive in the market. Accept all valid responses.

Mark scheme

5 Evaluate the impact on LT of giving some tour guides an employment contract with a guaranteed number of tours 12 per month. Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion is made in the business context. Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 5 Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of employment contracts or knowledge of the impact of giving full-time employment contracts. Developed knowledge + + will be demonstrated through knowledge of employment contracts and knowledge of the impact of giving full-time employment contracts. Meaning of contract – an agreement between two parties Meaning of employment contract with guaranteed hours/number of tours Generic advantages of employment contracts, such as certainty of wages, security, ties employee to the company to some extent, but also commits the company to terms. AO2 Application Limited application, applies knowledge to LT once. Developed application, + applies knowledge to LT twice. The guides are taking customers on sightseeing tours, probably a few hours or full days, but possibly longer. Customers may choose street food or shopping tours, guides may specialise. The guides have the responsibility of making all the relevant bookings of transport and other arrangements. Some of the guides will have very specialist knowledge about places and may take customers to places they would not usually go with standard tours. The new small group tours for cruise passengers are planned to go every week, so more regular work for guides. There may be competition for the services of guides in many popular destinations. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis OR offers a two-sided analysis. Development of application points, in terms of the likely advantages to LT of guides feeling more secure and tied to the company, including impact on customer loyalty, future sales and revenue. 5 Guides will have some certainty in terms of their hours and also possibly which tours they will be taking which will allow for more effective planning leading to reliability of service and higher customer satisfaction. Also maybe better relationships with suppliers such as vehicle hire, attractions and hotels. Guides will offer a better service to customers, maintaining high satisfaction level. Regular business and leisure travellers will be encouraged to use LT for future travel arrangements, due to building a relationship with guides , encouraging increased repeat sales. LT will be more likely to retain a skilled group of guides, who will be less likely to defect to competitors leading to lower recruitment costs. There could be a negative impact on the motivation and loyalty of some guides who are not offered the contracts. If guides have contracts and there are not enough bookings, LT will still have to pay them, therefore negative impact on profits. AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. The reasons for choosing the guides to offer contracts to must be transparent, maybe even with an application process, so that an ‘us and them’ problem does not arise. The positive impacts on LT will depend on the level of bookings matching the contracted tours/hours. The travel industry is highly sensitive to external factors, such as political instability in countries worldwide. Some guides may also like the current flexibility and will not want contracts. LT will lose some of its operational flexibility if some guides have these contracts. Overall justified judgement on good/bad for LT. The success of Kanon’s plan will depend on all of these and possibly other factors, as will whether this will be the right final decision. Accept all valid responses.